Sunday, October 14, 2012

Why the Americans must prosecute HSBC if they are proved to have committed more offences of corruption and money laundering!

Today, the Sunday Times reports yet another shabby
story dealing with allegations of financial wrong-doing by HSBC. In an article
by David Leppard entitled '...Kickbacks to Saudi funnelled via HSBC...', the
allegation is made that the bank was the conduit of nearly £14 million in
alleged bribes paid by a British defence contracting firm to a Saudi Royal.

HSBC accounts in both London and Manhattan (even
more proof if more proof were needed that these two cities are the world's
leading money laundering centres), were used between 2007 and 2010, so it is alleged, to provide the avenues to launder vast sums of slush
money to private company accounts in the Cayman Islands.

If this story were not so serious, one could be
forgiven for marvelling at the sheer predictability of it all!

The Sunday Times reports that it has been shown
documents which itemise '...28 separate payments made by GPT, a British
subsidiary of EADS the European
aerospace company that were sent via HSBC in London and Manhattan to the Cayman
Islands...'

Managers at GPT had raised concerns about these
payments, concerned that they were illegal. These payments are now apparently
the subject of an SFO investigation which began after another whistle-blower
from GPT reported his concerns to the Sunday Times in 2011.

It is alleged that the huge contract to provide
and supply equipment to modernise the Saudi satellite, radio and intranet
systems of the Saudi royal palaces and national guard premises were part of a
£2 billion, 10 year project, awarded to GPT
by the Saudis. The whistle blowers allege that the bribes included cash, as
well as gifts of luxury cars and jewellery.

Again, the sheer mundanity of the nature of the
relationship and the goodies provided is so predictable. Money, fast cars and
bling, no doubt what your average Saudi prince demands for his influence!

What is of much more interest however, is the
fact that one of the venues reported for the continuation of this alleged
wrongdoing, is the HSBC branch in Manhattan, because it will add further lines
of enquiry to the existing investigations being mounted by US prosecutors into
HSBC's admitted role in laundering vast amounts of drug money for Mexican drug
barons.

HSBC has already been forced to apologise this
year for what it has described as 'shameful' breakdowns in systems that should
have prevented it from laundering this money for terrorists and drug lords, for
which it is reported that the bank has set aside in excess of $700 million for
potential fines.

I love these admissions, these corporate mea
culpas, when confronted with wrong-doing. Forget the use of the word 'shameful'
breakdowns, and substitute 'deliberate criminal complicity' instead and then we
might be getting somewhat closer to the truth.

You don't launder this volume of money by
accident, because somewhere along the line, your systems and controls for preventing
money laundering just 'broke down'! You do it because you work in a bank which
is willing to flout every rule in the book and engage in layer upon layer of
criminal conduct if the money is right! You do it because your management
structure is defined by a criminogenic determination to amplify the anomic
environment within which you operate and in which you expect your staff to co-operate.

Are we seriously meant to be believe that during all
this time no-one inside HSBC saw what was going on and
thought, just for one minute, '...fuck me, that's
an awful lot of money coming from a country where gang slayings to control the
narcotics industry are a daily occurrence...I wonder if I should mention this
to someone in charge..?'

Those of us who followed the case of Shah -v-
HSBC here in the UK watched while the story of HSBC's wholesale failure to
organise a proper set of structures and controls to maintain a 'fit for purpose'
anti-money laundering reporting and disclosure structure in the UK was pulled
apart and their dirty linen washed in public by a clever QC. HSBC may have come
out of the case on the winning side, but nevertheless, the public shaming they
received at the hands of the claimant's lawyers was always
going to be hard to swallow.

When you set that knowledge against the stories
of Mexican drug money laundering and other sanctions failings, you begin to realise
that this state of affairs was the norm for HSBC. It was as if the bank had
simply decided to ignore the rules and regulations and go for broke because
they were safe in the knowledge that no-one, certainly in the UK, was going to
investigate them!

This is the perennial problem with the state of
British financial regulation! Oh the regulators like to talk a
lot, and go to international regulator's conferences and conventions, and do a
lot of liaising with their counterparts, but when it comes to taking down the
gangsters and the banksters who control the British banking industry, they are pathetic.

I have never
understood why this should be, but it is a standard which goes back for many
years, and which the British financial regulators have routinely applied. I
once interviewed a senior official of the earlier version of the FSA in 2000, as
part of a project to write a report for H.M.Treasury on the risks to the London
market from money laundering.

I asked him why
they had not used their powers to regulate the anti-money laundering
requirements in the UK markets in the past, and whether they would be more rigorous
in using their new powers on the question of prosecution of regulated members under the new regime, for breach of
the Money Laundering Regulations in the future.

He agreed that the FSA would
become responsible for a far greater degree of responsibility for prosecution
in a number of areas, including money laundering issues, but felt that this
predicated the need for a further regulatory interface. He said;

“…There
is an anxiety about the new criminal functions which we are being tasked to
accept…various elements such as insider dealing, market manipulation, etc, all
tend to colour our internal philosophy towards the question of conducting
prosecutions…you really should understand, because of the difficulties
associated with obtaining convictions in the criminal courts, there is no
unswerving acceptance of the need for wholesale prosecution powers…”

This answer was given in
such an open way, in contrast to so many other answers which he gave, that he
was invited to state why he was so sure that this was the case. His answer was
studiously revealing, and must be considered to contain a huge degree of truth.
He said;

“…Because,
frankly, Howard Davies (then head of the new FSA)
has no intention of ending up with the sort of reputation which so bedevilled
the SFO in its early days. He refuses to be tarred with the same brush as
Barbara Mills or George Staple…” (Former heads of the SFO)

I cannot see any greater degree of likelihood of anything being done to
HSBC in this country, if they are found to have committed further offences. I
do not anticipate any new prosecutions being brought against the responsible
members for overseeing these criminal actions. I would like to believe the SFO will do it, but theirs hasn't been an enviable track record in such cases in the past.

It will be up to the Americans to bring prosecutions for any offences
which may have been committed in Manhattan, and to do so expeditiously, because
this is the only way that this wholesale ignoring of and flouting of the law is
going to be stopped and examples made of these criminals at the highest level.
Prosecution is the only things these banksters fear, and we need to make them
feel very afraid indeed!

When I finished the report I wrote for HM Treasury in early 2000,
nearly 13 years ago. I was hugely concerned at the failure to regulate the
London market then, and I remain of the same opinion today. I reported the
summary as follows. Read these words and see if you can establish whether anything
has really changed in the attitude of our regulatory agencies in the interim
period.

"...In
this report I have attempted to demonstrate that the problems associated with
the...laundering of criminal money
have a two-fold genesis; first, the personality of the industry sector
practitioners in their willingness to take risks within a financial environment
capable of easy destabilisation; and second, the attitude of the financial
sector regulators towards their lack of willingness to enforce the provisions
of the Money Laundering Regulations, thus facilitating an unregulated financial
environment for the most criminogenic practitioners in the sector of greatest
potential financial flexibility.

I have sought polarisation
in both my questioning and in my report. I have not sought to be too willing to
accept explanations, which my many
years experience in this area of financial criminogenisis tell me are
misleading, mistaken or plainly untrue...Frankly,
I consider the potential dangers for unregulated money laundering in this area
to be so severe that I am willing to risk criticism, if it means that others in
positions of authority find they can share my sense of concern over what is, by
any standards, a highly dangerous state of affairs.

I have been very critical of
the attitudes of certain senior regulators. Again, I do not apologise for
taking this stance. I have been continually amazed by the wholesale ‘retreat
from reality’ demonstrated by some of the regulators and their apologists to whom
I have spoken, in their continued belief that they can somehow regulate a
financial market, with all the potential that such a market possesses for the
egregious to take the line of least resistance, by adopting the stance they do
towards demonstrating a complete
lack of willingness to adopt a dynamic, hands-on regulatory stance in areas
such as money laundering...'

When you read
or hear the new policy statements of the new regulators, and what they intend
for the future, remember these words, because they've said it all before, and
it means nothing!

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!